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Fundamental analysis examines the macroeconomic indicators, is able to significantly influence the behavior of the currency market. The study of such indicators, their interaction among themselves, the degree of influence on the market is the Foundation for the development of this type of market analysis.
Fundamental analysis allows a trader to assess the probability of further developments. Currency speculator, assesses the political, the economic status of countries, studies the factors affecting the future of a currency, is usually a study of long-term market situation for the further successful investments.
Factors of fundamental analysis
Factors that are considered important trader in this type of analysis are very different. For example, a pre-planned statement of the government on unemployment. On the other hand, there are a large number of factors affecting the market value of the currency is not direct, but indirectly.
For example, if a big company for gas production will make the decision to pull the pipeline to a new country, of course, this in turn will affect the sector of metallurgical companies and production enterprises that are engaged in the production of pipes.
The economic calendar is a factor of fundamental analysis
Probably, every trader takes into account in its work the economic calendar. Some speculators are trying to cash in on market fluctuations during the news, others try to avoid such moments, preferring to sit "on the fence" until the moment when the market is quiet once again.
In any case, an economic calendar can be viewed as reminders about upcoming important events. Trade on the news only partially can be considered a work using fundamental analysis. In this case the trader only uses a certain release date news and then taking action based on other methods of analysis of the situation.
Events that are not scheduled in the economic calendar, but affect the market situation, can also be attributed to fundamental factors. Trader of a series of events to draw conclusions about the most likely future developments. In this case, the person will consider the information that is to varying degrees as a shopping tool chosen for the work.
Typically, the data are not a direct guide to action, and more exactly serve as material for further reflection. Therefore, having the same information, speculators can provide different values to each factor, and ultimately come to different conclusions. In such cases we say that the experts disagreed, conducting fundamental analysis in a variety of ways.
As mentioned earlier, this type of analysis is used most often in the long run. A trader studies the situation and attempts to predict further developments for a long period of time. The combination of all the factors, which helped people to make some conclusion about the likely future fate of the trading instrument may not immediately result in the movement of the price of a currency pair or stock. It is possible that some time will pass until the market will gradually realize a trader previously made inferences.
The use of fundamental analysis
Typically, fundamental analysis is used exactly position speculators do not pay attention to short-term price fluctuations. Such specialists should be investors, not traders. Using this technique, for example, under day trading, most likely, can not be effective.
The difficulty with this analysis lies in the fact that the pair consists of two currencies of different countries. Thus, the trader will need to monitor the factors that affect the value of a currency is not in the same country, and in at least two.
Fundamental analysis is used by speculators when working on any stock exchange. For example, in the stock market the trader can study all the factors relating to the oil business, as well as working with the shares of companies linked to black gold. Forex speculator studies the political, economic factors of the countries, national currencies of which are the pair that used to work with, as well as the situation in the world.
The goal of fundamental analysis is to consider all possible factors that could affect the market price below, the highest probability to predict future market behavior.
Shortcomings of fundamental analysis
Then list the disadvantages of fundamental analysis:
• does not provide the opportunity to the trader to make accurate input and can show the development direction of future trends
• the difficulty of interpretation, since the same events in different periods of time can affect the price of a completely different degree
• this type of analysis is practically useless for those speculators who focus on short-term trade.
Methods of fundamental analysis useless in short term trading, because the transactions are very quickly closed, unable to see consequences of those or other factors. Perhaps the only news used by scalpers, and other factors that can for a long period to send a trend in one direction or another, in calculation do not undertake.
|Category: Forex | Added by: (06.11.2017)